A Tech Startup Entrepreneur & Mentor Thinking Out Loud

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Most of my business readings this weekend have been various analysis of the potential Yahoo/Microsoft deal. Unfortunately, I haven’t been impressed by the level of the debate as many of the comments were all about “Microsoft is evil” and its corollary “Google is not”. I was hoping for more level-headed reflections but I think the involvement of Microsoft in the story created a highly-emotional environment in the tech blogosphere.

One of them stood out for me. Tim O’Reilly looked at the big picture and tries to extract some industry meaning, showing once again his crystal ball is one of the most polished in the industry. Talking about industry consolidation in general and Yahoo in particular, he offered:

The web companies that have a chance of surviving as independent entities are those that truly understand and exploit the rules of the new platform: harnessing collective intelligence to build rich troves of data that literally get better the more people use the application, running ahead of any possible competitor simply because of the network effects that pile on to keep them improving faster than any newcomer. Some of Yahoo!s properties (e.g. Flickr) have that characteristic, but Yahoo!’s business as a whole did not. It was ultimately a halfway house on the way to Web 2.0. It’s original business was based on a literal aggregation of user generated content, but it quickly became a more traditional content and services portal. Later companies like Google leapfrogged it by building services that tapped more directly into the native network effects of the Web.

The other important characteristic of the winners, of course, is that they tap into a data stream that really matters. Owning network effects around consumer photos, for instance, is much less powerful than owning network effects around paid search. So one of the key questions we have to ask ourselves going forward is this: what are the major data subsystems of the future Internet Operating System. Location, identity (and social graph), search (and not just web search but also product search, in which Amazon has a very strong position) come to mind. In a lot of ways, finding the data associated with the old vectors who, what, when, where, and how is a good place to start.

What it means: O’Reilly posits that local search (Location + Search) is one of the key elements of the future Internet Operating System. I completely agree with him. I would add that no one has locked the market yet. No one in that field is deeply embedded yet in the Web O/S. So, this still represents a major market opportunity. And the big question remains: who will own “where”?

In my daily work, I often use the expression “social media”. I’ve been asked to define it before but I always end up talking about user-generated content and reciprocal, two-way conversation between the user and the media. Wikipedia has a good definition but Joe Marchese from the Mediapost’s Online Spin adds more meat:

“Social media describes the online technologies and practices that people use to share opinions, insights, experiences, perspectives and media itself. Social media can take many different forms, including text, images, audio, and video. These sites typically use technologies such as blogs, message boards, podcasts, wikis, and vlogs to allow users to interact. A few prominent examples of social media applications are Wikipedia (reference), MySpace (social networking), Gather.com (social networking),YouTube (video sharing), Second Life (virtual reality), Digg (news sharing), Flickr (photo sharing) and Miniclip (game sharing).” (source: Wikipedia)

Marchese begins: “first I think one of the biggest myths regarding social media is that it equals user-generated content. (…) Second, there is nothing about social media that demands user creation. The “media” part of social media can be anything from professional content to home videos. Just because “America’s Funniest Home Videos” consisted of user-generated content certainly didn’t make it social media. Conversely, just because “Heroes” is professionally produced doesn’t mean that it can’t be social media.”

He continues: “the real difference between broadcast media and social media is not the media itself, but the system of discovery, distribution, consumption and conversation surrounding the media. (…) What many of us are defining as social media today are actually just technologies specifically architected to facilitate people’s natural tendencies to seek out, share and discuss media content. Think about it. How is MySpace social medium? I would certainly say that MySpace is the largest and most influential social media platform of our time, but it doesn’t create media (at least not for most of it). The media one finds on MySpace is a mix of professional, semi-professional and (I hate using the term) “user- generated” content, and that media is made social by the context of its distribution and its ability to create dialogue between people. ANY TYPE OF MEDIA CAN BE SOCIAL MEDIA — and eventually all media will be social media in the most literal definition. This will have serious implications for media companies and advertisers alike, so it is important that we are not dismissing social media as the user-generated portion of the Internet.”

What it means: so my quasi, minimalistic definition wasn’t too far off. I agree that social media is all about the conversation but I think that, as part of that conversation, there will be some “user-generated content” happening. I agree that all media can be social media. I would even say that all media will have to become social media. Consumers are getting used to contributing to the conversation and that’s not going away. BTW, I like his thoughts regarding America’s Funniest Home Videos.

What it means: this makes complete sense. The Flickr brand is much stronger and has much more soul than the Yahoo Photos brand. I’m going out on a limb but I’d like to suggest social media and applications are able to build stronger brands because of higher user involvement. I think large organizations are starting to realize that they can have a portfolio of unrelated brands online and it still makes sense from a business point of view. I expect Google will eventually phase out Google Videos in favor of YouTube who has a much stronger brand in the video vertical. Another noteworthy point: after acquiring Flickr, Yahoo moved the whole team to San Francisco (from Vancouver, Canada) but they’ve maintained a separate office for them in order to keep the entrepreneurial spirit (and possibly retain key employees).

I’m down here visiting the Kelsey Group’s “Drilling Down on Local ’07” event, and a few minutes ago Safa Rashtchy, sr. research analyst, Internet media and marketing, managing director for Piper Jaffray, finished up his keynote address regarding local search. (…)

(…) as this is a local show, he expanded on user interest trends to say that “Local search is the second most popular activity other than e-mail. You will have more and more focus on local search, whether it’s information or product searches that are happening. The adoption of local search by both local and search advertisers will see an increase.”

He also predicted a shift of users away from portals to search platforms, and said the inflection point for local search will happen when businesses finally get more of their inventory online. The first company to do so, he added, will “win” the business race.

“The navigation method from portals is changing from portals to search,” he said. “People are saying ‘we know what we want, help us to find where it is and don’t tell us what we want to buy.’” Rashtchy continued, “The trigger point [for local search] is likely to be when you have a large number of major merchants that have their inventory easily available online. I thought we might see something by now, but nothing significant has happened yet, but once we see a good part of inventory easily accessible online, we will see a shift.”

Finally, he predicted that mapping and satellite imagery will be coming an integral part of search. “Geographical representation of not just products, but also businesses, is more appealing — the visual aspect of it — and it will play well.” (…)

What it means: like Safa, I’ve recently become a strong proponent for graphical navigation in local search (through maps, images, etc.). I just love the Flickr geo-tagged image navigation interface (BTW, that’s a great source of local content). Safa also thinks that product inventory is also a killer app but I think it’s going to take a long time before we get to that place. I still think CrowdShopping (or Tuangou) can happen more quickly.

“A debate in the blogosphere and trade press over the relevance of the Web page-view metric picked up steam in the latter half of 2006. While many argued the metric has never been more than a rough proxy of impressions, it is the universal currency of online media buyers and sellers, and it’s making publishers increasingly, if secretly, anxious. ”

“The underlying issue is the adoption of new Web technologies, like Ajax and Flash, which increasingly eliminate the need to reload a Web page. (Think of more dynamic services like Google Maps, Yahoo Mail, Flickr and YouTube videos embedded in blogs.) These technologies, while enhancing usability and increasing functionality, usually result in fewer page views for the publisher, and, ahem, fewer CPMs to sell. This more complicated Web means clickstream, consumption and interaction is now far less represented by the page view. ”

What it means: I stopped being a fan of page views in 2001 when I discovered that unique visits and unique visitors were a much better value indicator for a local search site. When the search engine economy picked up steam in 2004, I switched my interest to searches. I’m now a proponent of converted searches (i.e. searches that convert into desired action) as a better ROI measure. As I like to say: “Not all searches are born equal”. But there’s no good third-party reporting tool that will allow you to measure this.

“The premise (of social search) is that the next big thing is to harness the power of communities to generate more relevant search recommendations.”

1) Yoono “describes itself as “instant people-rated Web,” meaning, that when you surf, Yoono displays a list of Web pages that others have classified as “favorites.” It works with a toolbar or plug-in. See more in TechCrunch.

2) Gravee “is a social search application that differs from others in that it is trying to change the economics of search by sharing advertising revenue with content owners, with a rev-share business model. The site shares up to 70% of all ad revenues with the natural listings that appear on the same page when an ad occurs, as well as with the referring Web site.” here is TechCrunch’s take on it.

3) Jookster “is a community-driven social search tool that works primarily through the browser toolbar. Jookster collects photos, video and bookmarks from sites like YouTube, Flickr and del.icio.us into one place that can be searched, saved and shared with friends. ” Mashable covered their relaunch a month ago.

4) StumbleUpon “employs user ratings to form collaborative opinions on Web site quality with the goal of helping you “stumble upon” great sites. When you “stumble,” you only see pages that friends and like-minded “Stumblers” have commented on. ” Many people love StumbleUpon (they have over 1M users), see the description here.

5) Otavo “describes itself as not just a search engine, but a community of users and staff members who participate in your quest to find answers quicker. As an Otavo user, you can ask any question or seek a quest of your choice.” TechCrunch covered them a while back.

What it means: Not sure what to think of “social search” yet. I think it might work for a very specialized topic or as a recommendation tool but I’m not sure you can be become a truly successful generalist search engine using a community (unless you count Yahoo Answers in this category). of these 5, I had heard of Otavo (because they’re based in Ontario, Canada) and StumbleUpon. The later is generating a lot of good buzz and is already a great source of traffic for many sites. I wonder if social search is more a feature than it is a destination… It could be a great add-on to any shopping or directory sites (which is a little bit what Aggregate Knowledge does).

1) Atomization: 2007 will see the acceleration of content/functions/applications atomization (decentralization) via the adoption of multiple syndication methods like RSS, XML and APIs by a majority of web sites.

2) Verticalization: The success of generalist social networks and online video sites in 2006 means that we will see the arrival of a multitude of new specialized players in these two fields.

3) RSS: a clear business model for RSS will emerge. It will start replacing e-mail marketing as a way to communicate directly (and better) to your customers

4) Local will become more social / Social will become more local: A good example of the later is the addition of maps (often Google Maps, the poster child for Atomization!) in FiveLimes or Flickr.

5) Traditional Media will continue to realize that they desperately need to capture eyeballs online, leading to more online acquisitions and/or investments.

6) Long distance & local calls will continue their move towards free. Model might actually reverse itself and we might finally see the strong emergence of pay-per-call as a legitimate lead model for advertisers.